Reductions of tax rates led to higher revenues, and not
lower. Many new enterprises came up, and the young people
are more ready than ever before to find jobs outside government.India
saw a revolution in telecom and information sectors. Organized
workers who had enjoyed immense protection for long, now
realize that their future is linked to the health of their
enterprises. The person-days lost an account of industrial
strife fell dramatically. The doomsdayers who prophesied
disaster with liberalization proved to be wide off the mark.
Most people are actually better off today than they were
a decade ago. By all standards, the reform process has yielded
yet, most Indians share a sense of unease and disquiet.
Our potential remains unfulfilled even today. Impressive
as they are by global standards, our growth rates are insufficient
to make a significant dent in poverty, or to absorb the
millions of youngsters joining the workforce. Fiscal deficits
stubbornly remain at the 10% GDP level. Government continues
to be wasteful, inefficient and corrupt. How is such a paradox
possible? How can we do better, and feel worse at the same
initial, exciting reform years accomplished an important
task. The dam of controls, licenses and permits, which held
back our productive potential and entrepreneurial energy,
was successfully breached. As the hitherto untapped reservoir
of growth potential flowed down, the level downstream rose
rapidly. That was the growth rate we witnessed for about
a decade. But as the reservoir is now emptied, mere breaching
of the dam will not do. We need to undertake the more difficult
task of catchment treatment to ensure fresh inflows into
the reservoir. That is why our growth rate is tapering off,
and our excitement is slowly giving way to forebodings.
obviously have to work hard to build the infrastructure
to encourage investment and promote the skills to enhance
productivity. Industrialization of a vast, underdeveloped
country seeking to emerge from agrarian economy is a gigantic
and complex enterprise. Mere capital market manipulations
and budgetary quick fixes will not do the trick. The US,
with its $10 trillion economy can easily afford a $500 billion
bubble created by 'irrational exuberance'. But India, with
its $500 billion economy can ill afford such euphoria without
the solid foundations of an industrial economy in the modern
first step is to get the extortionary bureaucracy off the
backs of the entrepreneurs. The draconian powers and shameless
plunder of the revenue-earning departments continue unchecked.
One only has to see the massive corruption and harassment
in central excise and customs. The entrepreneur is denied
both dignity and justice. Any resistance to the predatory
officials invites massive retribution and unending humiliation.
Many small and medium enterprises are forced to close down,
unable to withstand external competition and face the extortionary
the government really stepped aside, corruption certainly
came down. But the inexhaustible appetite of our political
system for ill-gotten funds remains unchecked. As a result,
corruption has merely shifted from the areas of economic
decision making to sovereign spheres of state activity.
There is mounting evidence of this shift in the last decade.
Increasing nexus between crime and politics, partisan interference
in crime investigation, administration of rough and ready
justice through brute methods for a price, abductions by
politically well-connected gangs for a ransom - all have
become more common.
does all this indicate? Obviously economic reforms are necessary,
but are not sufficient. We need to restructure our governance
process to make it supportive of a productive, competitive
market economy. Political and electoral reforms, decentralization
of power, measures to enforce rule of law, and instruments
of accountability - these are the vital tasks ahead. We
already lost precious time, and any further prevarication
will be costly. It is high time we recognised that good
politics, good economics and stable and peaceful society
go together. One cannot exist without the others.